Communist Party of China : Chris Harry's Perspective

 I have grouped their top 3 adjectives to describe the CCP under four main categories, then applied them to construct a brief description and analysis of the main features and characteristics of the Chinese Communist Party.

1. The CCP’s Political orientation

The first grouping of adjectives represents a broad outline of the CCP’s form of governance and its position on the political spectrum:

Pseudo-leftist, tyrannical, fascist, dictatorial, imperial, far-left, centralised

At its core, China is a fascist party-state which imposes authoritarian hierarchical rule strictly opposed to democracy or liberalism. China is run by a dictatorial elite under an absolute ruler who demands unquestioning obedience and enforces subservience by means of tyrannical oppression.

Many aspects of today’s China are a continuation of its imperial history. The CCP lays claim to the historical territories controlled by the Qing dynasty, which was established by Manchurian invaders from beyond China’s Northern border. Based on this claim, the CCP is expansionist by definition, as it seeks to regain control over a foreign historical empire significantly larger than China’s current geographical size, and which included vast swathes of territory outside of what had traditionally constituted China for over three thousand years. This imperial stance toward foreign relations explains much of Communist China’s historical border clashes with Russia, India, China and Vietnam, as well as its current attempt to usurp ninety-percent of the South China Sea, and its frequent naval and air incursions against Taiwan and Japan.

The CCP regime, itself, is mostly run by a privileged class of Communist ‘aristocratic’ families whose power, wealth and special status is passed down hereditarily to their descendants who are above the law, much the same as the elite in feudal times. And like all empires of the past, China is heavily centralised in terms of its power structure and the party’s complete control over land, resources, the economy, politics, military affairs, the legal system, culture, society, thought, education, and all other forms of media and expression.

Some would place Communism on the far-left of the political spectrum as a more puritanical and ideologically-centred version of Socialism dedicated to worldwide revolution, whereas others proffer that the Chinese Communist party is actually pseudo-leftist, as it claims to be a Marxist-Leninist Socialist state, but in reality tends to be more exploitative against its own people than most so-called Capitalist countries around the world today, whilst offering much less, on average, in terms of social welfare for its ordinary citizens.

This exploitation is now expanding beyond its own borders in the form of economic colonisation of poor developing nations and the plundering of their resources. So much for world revolution! Historically speaking, recall that Germany’s fascist regime during WWII was run by the National Socialist Party. Moreover, Karl Marx advocated for individual freedom, as well as freedom of the press, whereas Communist China is diametrically opposed to both of these freedoms, as well as any other freedoms on principle.

2. The CCP’s world view

Adjectives placed in this second grouping reflect the CCP’s perception of the world and the underlying motivations underpinning the nature of its actions and behavioural parameters:

Imperious, racist, nationalistic, rogue, close-minded, hyper-sensitive, power-hungry, reactionary

The CCP’s imperious outlook and sense of utter entitlement stems from a traditionally close-minded and nationalistic sense of superiority intrinsic to Chinese culture during much of China’s feudal dynastic past. In many aspects, it also mirrors the Soviet Union’s ambitions of global hegemony and emerges as an ideological and geopolitical successor to the failed Soviet empire. The CCP’s extreme and zero-sum mentality has been further bolstered by the complete subjugation of its own citizens, a steady rise in power and wealth, and its rapidly increasing influence across the globe. The West’s appeasement policy toward China also inflates the impression of China’s rising strength and status in world affairs while providing positive feedback to reinforce the CCP’s own belief in its inexorable path toward surpassing the world’s preeminent superpower.

In addition to a traditionally racist and Sinocentric world view, the CCP actively pursues a fantastic and delusional narrative of its Marxist-Leninist mission to eliminate and replace Western Liberal-democracy and a Western-based world order with a ‘Chinese model’ of governance. In order to achieve this goal of global dominance, it is also committed to the dilution and obliteration of all religion, philosophy, culture, as well as any other form of thought which challenges or conflicts with CCP ideology. This is what drives the CCP to engage in the steady infiltration and erosion of international institutions and democratic societies, whose existence undermine the legitimacy of China’s Communist regime.

The CCP is motivated by an all-consuming and power-hungry outlook toward the world which precludes the possibility of peaceful co-existence, compromise, or equality with other nations, let alone other political parties, institutions, associations or organisations within or beyond its borders.

The fact that the CCP rules over and plunders China arbitrarily and unfettered by laws or rules, is also clearly reflected in its dismissal of internationals laws, customs, and conventions.

As a rogue operator, the CCP refuses to be bound by international rules or norms. At the same time, it proactively seeks to undermine the current world order for its own advantage. On a societal level, the CCP is a reactionary and ultraconservative syndicate which also opposes social progress or liberalism, yet fully embraces the weaponisation of science and technology for financial gain and to consolidate its own monopoly on power.

Since the CCP lacks a legitimate basis for its rule over China as an unelected dictatorship, it is hyper-sensitive toward even the slightest criticism of its leadership. The Communist regime also reacts swiftly and sharply to the exposure of the innumerable lies it must constantly spin in order to maintain an alternate reality fabricated by party propaganda. Party propaganda creates a bubble which envelopes its population and shields them from objective reality, so as to convince them of the inevitability, superiority and invincibility of the Chinese Communist Party, while concealing its many weaknesses, countless transgressions, rampant corruption, and constant abuses of power. This aggressive and often hysterical response to criticism or the exposure of its countless lies, stems from the fact that any accountability, transparency, or effective supervision of the Communist regime could easily puncture or compromise the propaganda bubble that serves as its most important tool for maintaining illegitimate governance over 1.4 billion Chinese citizens. On the one hand, this hyper-sensitivity is a genuinely intense reaction that reveals the regime’s fundamental fragility. On the other hand, it is also a deliberate strategy to quickly counter any challenge to its rule or legitimacy. The fierceness of its reaction immediately raises the bar for individuals or groups by intimidating anyone who dares to openly reject or accuse the party-state or damage the strength of its propaganda. This bullying tactic, so frequently applied by the CCP, is an attempt to avoid any hard facts and evidence from being presented which contradict its false version of reality or reveal its misdeeds and shortcomings.

Most people are reluctant to pursue an argument with a crazed lunatic screaming and raging at them simply because they called him out for throwing a candy wrapper on the street. The lunatic has instantly raised the level of conflict so high, it is not seen as worth demanding that he take responsibility for littering. Now scale this behaviour up to the level of a second-tier superpower and you have the CCP. Over time, everyone gets used to avoiding or ignoring a frenzied and combative lunatic like the CCP, which only encourages it to engage in an ever more irrational, aggressive and hysterical manner whenever it meets with criticism or faces obstacles in its path.

The CCP’s hyper-sensitive disposition also intersects with the regime’s heavily nationalistic education system, which promotes a binary us-versus-them mode of perceiving the world among its citizens. The Communist regime then combines nationalism with reverence, obedience to, and what the CCP perversely refers to as ‘love’ for the party, such that those opposed to the party are designated as traitors while faithful followers of the party are praised as patriots. This way, not only can the party justify imprisoning, abusing and disappearing dissidents or critics, it can then also force every other citizen to stand on the side of loyalty, or at the very least, feign obedience to the party. Moreover, this nationalistic orientation to education and propaganda throughout all forms of media, helps to prevent or discourage Chinese citizens from trusting, befriending or interacting with foreigners. Chinese people learn not to cross the line set by the party against sharing any information about China with the world which the regime deems sensitive – essentially any information about China that paints a less than perfect picture of the country or of party rule. At the same time, nationalistic propaganda is used to further distort reality, so as to accentuate China’s advantages, as well as to portray Communist rule as providing stability, progress and prosperity to China, whilst presenting the West as decadent, chaotic, economically unstable, hegemonic, and on the verge of societal and moral collapse.

In more recent years, this nationalistic red line has now extended to include anyone inside or outside of China who suggests that anything might ever be wrong in the land of the Chinese Dream under Emperor Xi’s exalted reign. Then the hyper-sensitive nationalistic trigger sets off the party on a feverish nationwide campaign to insult, attack and boycott any nation, individual or ethnic group deemed to be an enemy of China. These ideologically-driven hate campaigns represent an active brainwashing experience that helps to strengthen the narrative of China versus the world in the minds of the participants, whereby the regime requires that all patriots must rally behind the party in order to protect the nation and the pride of the Chinese people.

One of the gravest side effects of all the propaganda lies, ideological and nationalistic indoctrination so pervasive throughout all levels of society, culture and the media under CCP rule, is that even party officials and regime leaders themselves begin to believe in their own lies and the party’s make-believe version of reality. This simply serves to further enhance and perpetuate the CCP’s twisted, antagonistic and paranoid vision of the world.

The CCP is also a rogue actor by design, as it is categorically opposes the common practices or norms of behaviour shared by modern, civilised nations that would limit it in anyway or prevent it from maximising its own interests by the slightest degree. The party’s perspective on the world is essentially a negative struggle for power, wealth and dominance. Any group or individual outside of the party, and by extension its control, is considered an adversary to be bribed, threatened, neutralised or exterminated. The concept of a win-win does not exist for the CPP. If the CCP were a human being, such an individual might well be described as a paranoid, delusional, and sociopathic megalomaniac with severe narcissistic tendencies. The CCP’s message to the world is clear and consistent – Give me everything I want, right now, or get the hell out of the way!

3. The CPP’s modus operandi

This third set of adjectives fleshes out some of the core components behind the party-state’s operational principles and its approach to domestic rule and foreign policy:

Opportunistic, strategic, deceptive, genocidal, conniving, environmentally destructive, ruthless

Perhaps the CCP’s greatest strength is its utterly flexible approach to problem-solving with respect to surviving and governing while expanding its power and influence around the world. The CCP’s strategic orientation toward virtually every action it takes, or on any issue or obstacle it faces, is based on a deceptive and conniving approach. This is what the Chinese refer to as ‘xiao congming’, which can be translated as cleverness or petty shrewdness. More literally translated, it is a ‘small’ or ‘small-minded’ intelligence. In Chinese the use of the term ‘small’ refers to someone who is selfish, unscrupulous and engages in underhanded trickery. You might even call it a sort of CQ or Cleverness Quotient.

When this opportunistic methodology is practised in its purest form, it becomes a ruthless utilitarianism that seeks to maximise the regime’s own advantages, financial gains, and political interests through deceit, manipulation, theft, threats, violence, and bribery. Unchecked and unconstrained, it leads the CCP to exploit and weaponise literally anything at its disposal that will advance its objectives. Free from moral considerations, unbound by oversight, or any impulse to abide by rules or standards of conduct, this provides the CCP with its greatest single weapon and represents its core strength.

A concrete example of the CCP’s strategic and plunderous perspective is graphically illustrated by its environmentally destructive mode of economic development. The extraction of resources by the party-state is unfettered by almost any consideration to protect China’s ecosystem or ensure its sustainability for future generations. By cutting safety standards for workers, hiding or lying about pollution levels, as well as by failing to enforce environmental protection laws and standards, the CCP can produce and manufacture goods more cheaply than most other countries. State-owned enterprises are also given a freehand to exploit and damage China’s lands and waterways so that corrupt officials may accrue greater profits. Chinese SOEs, many of which are running at losses, have unlimited access to funds from the banks that are all controlled by the state. China can then produce on a massive scale, and at below-cost, which enables the CCP to flood markets across the world with Chinese goods in order to monopolise market share and control the price of key raw materials on a global scale. These companies enjoy subsidised electricity and water pricing and are often supplied with large tracts of land for free. The regime also frequently evicts citizens and takes their land away with impunity because the entire country and all of its resources belong to the Chinese Communist Party.

The unsustainability of this economic development is characterised by massive income inequality, ecological devastation, and a massive national debt-to-GDP ratio of approximately 300 percent that is steadily climbing. Its infrastructure-led, planned economic approach has been fuelling China’s growth at an artificially high pace, such that China is now also facing a real estate bubble and massive over-capacity in many industries such as steel manufacturing and high-speed rail. The emergence of dozens of ghost cities across China built to house tens of millions of new city-dwellers now stand virtually empty – like giant monuments bearing witness to the CCP’s irrational, unsustainable and environmentally-destructive economical model.

Another extreme consequence of the regime’s unadulterated exploitation is that even the Chinese people are simply viewed as cattle, material or fodder for gain. The CCP’s genocidal policies carried out against landlords led to the murder of millions in the nineteen-fifties, in order to implement so-called land reform. This was followed by an entirely avoidable and unnecessary mass-starvation of tens of millions during the Great Leap Forward in the late fifties and early sixties that was precipitated by the Sino-Soviet split - and an end to wide-scale Russian aid and co-operation to assist Communist China - as Chairman Mao decided he no longer wanted to play ‘little brother’ to the Soviet Union. Upwards of 36-40 million starved in order to save the face of the Communist regime and its ruler, Chairman Mao, when China exported its wheat and grain stores to Russia, rather than face the humiliation of being in debt to Russia. Humiliation was absolutely unacceptable for the party, but mass starvation in the tens of millions was perfectly fine for its leaders.

The Cultural Revolution followed soon after mass starvation during the Great Leap Forward and continued for a decade from 1966-1976. Once again, this led to the death of millions of people, as the citizens of China were plunged into a fictitious ideological struggle that descended into mass chaos, violence, and a civil war. All of this death and destruction was unleashed by Chairman Mao in order to preserve his own power and control over the party-state in his factional struggle against rivals within the party.

Just over a decade later in 1989, we then witness the mass genocide of thousands of innocent students and protesters by PLA troops, who for the most part, were peacefully demanding political progress, democracy, and an end to corruption and special privileges for the families and children of the party elites.

In 1999, another bloody campaign against Falungong practitioners was unleashed and still continues to this day. The CCP have not only oppressed, imprisoned and enslaved these religious adherents, they continue to make money off large-scale harvesting of their organs for profit to this day.

In more recent years, thousands of mosques and churches have also been desecrated or demolished under the leadership of Xi Jinping since 2012. While Buddhism is peaceful, apolitical and non-confrontational, and therefore seen as less threatening to party rule in China, many outdoor Buddhist statues are now being removed from in and around temples, just as Christian crosses have been removed from the remaining churches that have so far evaded demolition.

Five years ago saw the rapid and large-scale detention, arrest and torture of over 300 hundred civil-rights lawyers all across China. At the same time, the CCP has unleashed an intensified crackdown on online dissent, in conjunction with an all-out assault against the recent emergence of civil activism in Chinese society which still continues in 2020. Essentially, any competing thought, cultural expression or societal grouping which differs from Communist dogma and orthodoxy is repressed, vilified, denigrated, assimilated or eradicated.

Mistreated and abused under China’s Communist regime for decades, the Tibetan, Mongolian and Uyghur peoples in China are facing a comprehensive campaign of cultural and ethnic genocide, so that the Communist regime can secure access to strategic land bridges across Asia to push its economic imperialism and take full advantage of all the local riches and resources to be had in these regions.

The most extreme example of this is how Uyghurs and other Chinese Muslims are forced to speak Chinese under detainment in concentration camps on a massive scale, as they are forced to undergo an intensive programme of Communist indoctrination, while their children are separated from their parents and grandparents to be brought up as party-loving ‘Chinese’ children in state-run boarding schools. There are reports of mass sterilisation of Uyghur women, while many of the men are sent off in the thousands to work as semi-slave labourers in factories across China. Many male CCP minders are then dispatched to live with remaining Uyghur family members who have not yet been sent off to the concentration camps. Some reports suggest that these party minders even sleep in the same beds as the local women of local Uyghur families, whose husbands, brothers and fathers are detained in concentration camps or forced to work in factories far away from home. One can only imagine how many local Uyghur women are being raped by these Chinese minders, while many other Uyghurs are forced to sing songs in Chinese praising the Communist party, being forced to eat pork or being banned from observing religious fasting during Ramadan. By separating Uyghur families, the Communist regime can destroy the local culture and language, assimilate the men and women, and prevent the women from reproducing, then further disburse the population density of the Uyghur population. Decades ago, Uyghurs made up over 80 percent of the population in their home region of Xinjiang and have now fallen to less than 50 percent of the population, also thanks to a massive influx of Han Chinese. At the same time as the party actively disintegrates Uyghur culture and society and assimilates the Uyghur population, the Communist rulers can make money off the backs of Uyghur detainees from the concentration camps who are then sent off to factories under enforced labour in Chinese factories outside of Xinjiang.

The Orwellian level of control exercised in Xinjiang, ironically termed the Xinjiang Uyghur Autonomous Region, likely surpasses any other place on planet earth, including North Korea. The streets are constantly patrolled by vast numbers of PLA troops in armoured vehicles or patrolling the streets while brandishing machine guns. The local Uyghurs constantly have their ID checked and the Communist authorities force them to install tracking and monitoring software on their mobile phones while a vast array of surveillance cameras scrutinises their every movement. The local Uyghurs have to go through scanners and metal detectors almost every time they enter a market or a shop and the men are not allowed to grow beards, while women cannot wear veils. Unauthorised gatherings of three or more local Uyghurs are also banned, whilst all Uyghurs under the age of 18 are banned from entering and worshipping in Mosques. Every meat cleaver owned by Uyghurs has an individually laser-tagged QR code etched upon it and each of these knives are chained down to cutting boards. Very few of these harsh restrictions are placed on the Han Chinese who live next to them, nor are their ethnic Chinese neighbours forced to undergo constant scanning, spot-checks, harassment, and interrogation

Virtually no respect is given, nor any allowance afforded for the free pursuit of local culture, traditions, religion or languages in Xinjiang. While some terrorist acts have been committed by Uyghurs against Han Chinese, due to the severe repression of Chinese rule, the large-scale imprisonment and the blanket criminalisation of an entire ethnic group of 9 million Uyghurs illustrates the CCPs attempt to maximise its own interests through extreme measures, due to a lack of moral restraint, or even a sliver of sympathy or compassion.

As long as the party faces no substantial consequences for its behaviour or strong resistance to its actions, it will resort to any level of repression, violence and totalitarian control it is capable of at any given moment. The CCP’s methodology is a concrete manifestation of its exploitative world view, its underlying motivation to retain and maximise power, and an intense drive for survival by any means necessary. There is no limit to the CCP’s deceptiveconniving and strategically-orientated opportunism, which leads to destructivegenocidal and ruthless behaviour that is unchecked by any sense of proportion, remorse or self-control.

4. The Defining features and effects of CCP rule in China

This final set of adjectives has been grouped to reflect some of the impacts and common characteristics of party rule:

abhorrent, incompetent, amoral, inhumane, deadly, dangerous, dystopian, evil, brutal, shameless, endangered, desperate

The CCP’s amoral and shameless mind-set has led to the creation of a brutalinhumane and abhorrent form of dystopian rule. In many respects, the CPP’s amorality surpasses any conventional judgement of good and evil. Pure utilitarianism, taken to its logical extreme, is beyond considerations of ethics, nor is it bound by any moral code. The CCP’s shamelessness imbues with it the ability to engage in any form of behaviour devoid of self-restraint, empathy or sense of responsibility. The CCP’s fundamental perception of the world poses a dangerous and deadly threat to the global environment, its own people, universal human rights and values, as well as to global law and order.

With the collapse of the Soviet Union in 1989, The Chinese Communist party state is now an endangered specimen in the global family of nations – a living fossil in terms of its backward, totalitarian structure and ideology, which is even less politically progressive than Iran and is currently regressing toward an ultra-leftist Mao-era dictatorship more akin to North Korea. Desperate to retain power, the regime is struggling to swim against the tide of human progress and political reform through its financial clout, a steadily expanding military threat, as well as a co-ordinated and multifaceted exploitation of advanced technology for the purpose of repressing its own citizens while pursuing the persistent and pervasive theft of intellectual property across the globe.

Yet in spite of all of the time and energy it has spent, and all of the unlimited resources at its disposal, the CCP often ends up revealing many incompetent aspects of its governance. The most glaring example of this is the fact that China is now run by an under-educated, semi-illiterate and egotistical despot who is infinitely unqualified to rule over such a vast and important nation. Since Xi Jinping took power eight years ago, the entire country has suffered steady economic decline and a disastrous foreign policy approach that has alienated most of the world’s most important powers, while raising distrust and alarm among the citizens of many countries across the world toward China. Currently, the world is facing an unprecedented pandemic largely as a result of the party-state’s criminal negligence and initial mishandling of the crisis under Xi Jinping’s ineffectual rule. The irony of Xi’s rise to power might actually lie in the fact that the party elders could well have chosen him precisely for his lack of ability, as a compromise proxy to patch over conflicts between divergent factions within the retired elite – a malleable figurehead who would not challenge or threaten their authority.

Chairman Mao himself feared and oppressed Chinese intellectuals because their superior knowledge, intelligence and capacity for critical thinking could be fatal to his rule. Therefore, one of the overriding principles and characteristics of academia under CCP rule for decades is to serve as cheerleaders and apologists for the regime, as well as to concoct a narrative for the masses which convinces them of the correct and glorious leadership of the party. For party officials, academics and advisers in China, there is a far greater incentive to tell their superiors what they want to hear, and to cover up shortcomings or failed policies, than there is to undertake corrective measures or provide solutions. In fact, officials who dare to present any flaws of leadership, offer suggestions for course corrections, or expose the incompetence and corruption within the party, are virtually all demoted, dismissed or detained, while some end up being tortured and slowly poisoned to death in prison.

The overwhelming lack of oversight or monitoring of the CCP leadership and its officials can also easily lead to complacency. When errors are made, they are often simply covered up and officials are often not held accountable for their incompetent and corrupt practices. Many of the CCP’s top echelon are born into positions of power, wealth and privilege based on their Communist aristocratic pedigree rather than their ability. Top officials who maintain an iron grip over China’s political and military machinery are mostly chosen from the hundred or so elite families of the party’s ‘red aristocracy’ and their descendants.

Unity, loyalty and absolute secrecy serve as far more crucial elements ensuring the survival of party rule than merit. Incompetent and corrupt officials, inefficient State-owned enterprises operating at huge losses, as well as a massively corrupt and less-than-battle ready military, are all largely exempt from scrutiny or legal responsibility in exchange for their staunch support and defense of the totalitarian regime. Bribery, deception and connections to the party elite can easily trump basic competence when securing a position of power and privilege within the CCP hierarchy.

The glue that holds the party together is the promise of a joint exploitation of the masses, immunity from the law and a mafia-style oath of fealty and secrecy to protect the party’s overall interests from any outside interference, monitoring or accountability. To further cement party loyalty, the punishment for any party member or official who breaks that oath is swift, harsh and sometimes even fatal.

While A Brief Anatomy of the CCP merely represents a very cursive attempt at delineating the major contours and elucidating some of the key characteristics of the Communist party-state in China, hopefully it can shed some further light on the essential features and components of this dystopian and tyrannical, rogue-state. 

Thanks to the Original Author of this content Christopher Harry ( Author of China Harry's Blog ) for writing such a wonderful content about anatomy of Communist party of China. Please follow him for more updates about China.

Investing rules in the bear market

After having spent over 10 years working for the most prestigious names in the financial industry and having witnessed first hand two large financial stress periods (the Global Financial Crisis and the European Debt Crisis)  here are my ten suggestions you may potentially consider while investing

Buy gradually on the way down

If you have directly or indirectly prepared for a period of financial stress and have available cash you may consider starting investing now. A good strategy is to build rules and stick to them – either based on certain index levels e.g. S&P 500 at 2500 invest 20% of savings, 2300 another 20% etc. or based on timing (slicing every few weeks since we have no clarity which way the market may go and when it will bottom out)
Do not chase an upward trend in a bear market

One of the common mistakes we see is people chasing upward trends because of FOMO – Fear of Missing Out (when stock market recovers for a few days giving hope of long term gains). It takes more courage to buy according to predefined rules which often means buying when everything is gloomy and stocks lose massively. But in the long term it pays off. Do not be tempted by rebounds that may prove short-lived

Do not try to time the market

Even the best investors struggle with market timing. In fact most hedge funds (even the most prestigious ones) made substantial losses in the few past weeks. The market can turn rapidly both ways and while you may avoid some bad days avoiding just a few good ones can be extremely detrimental to your long term performance as illustrated by a study done by Fidelity. It is extremely risky to use leverage today since additional debt implies you must be correct on timing

Invest, do not speculate

You may not get spectacular 300-400% returns but your money will be relatively safe if you base your decisions on sound financial statements and diversify. ETFs are a great way to invest in indices without taking idiosyncratic risk (e.g. Luckin Coffee (see right) recently dropped 80% in one day on uncovered fraud – as Warren Buffett says “Only when the tide goes out do you discover who’s been swimming "). 
Ask yourself the question – am I more qualified than a professional investor to predict which industry player may outperform the rest of the market? Do I know how the landscape post crisis will look like? Even if you suspect knowing first order effects are you sure of the second and higher order effect (to Nicholas Taleb’s point)?

Avoid binary outcomes

Each crisis has its own most vulnerable industries where outcomes can be binary – in 2008 some Banks went out of business and as an investor you may have lost everything. The Coronavirus crisis has other prime candidates for such outcomes, airlines can be nationalised and hotel/tourism industry players can go bankrupt should the distress last longer. You want to avoid these investments until there is more clarity on consumer confidence

Look for financially resilient firms

If you do invest in single names, do not believe blindly in potentially meaningless dividend yields based on past data unless it has been confirmed by the management after incorporating all the outlook related to Covid-19. Instead look at balance sheets with low debt and build-in resilience (cash). These firms may outperform and even acquire weaker competitors in the current environment

Cash is King

Ray Dalio now infamously said a couple of months ago that ‘Cash is Trash’. While he is one of the best thinkers in Finance the remark was badly timed. Even in the most conservative scenarios keep some reserves. This is primarily a health crisis and while an economic crisis unfolds having a safety net is paramount. Additional unforeseen tail risks always exists

Diversify in other assets including currencies, commodities and high quality debt products

It is difficult to predict which countries may relatively outperform. Keep your portfolio diversified geographically (e.g. Asia, Europe, US) and product-wise potentially including commodities like Gold that may outperform in low real rates / high inflation environments. Consider very high quality debt products (Treasuries or Investment Grade Debt)

 Stay informed but remain cautious

And adjust your strategies accordingly. But be very careful with financial experts and consensus – when you see opinions converging usually something else will happen

Duration of the coronavirus pandemic is key

The risks are still skewed to the downside. While there is an attractive discount to peak market values and positive catalysts may materialise (most pharmas are working on Coronavirus vaccines and mitigating drugs) the time it takes and the change of behaviour will alter the markets significantly. The impact on people’s health even when cured and society at large is at this stage highly uncertain. Stay safe and healthy! 

This is a cross content post from Banker on Wheels